The Ninth Circuit Court of Appeals vacated a class-action settlement against Swift Transportation Co. Feb. 11, after finding the California Central District Court used too low of a standard when it approved the agreement before class certification.
The case
Former Swift driver John Burnell alleged in a 2010 Private Attorneys General Act case against Swift that the company violated California labor laws, specifically California Labor Code Section 2802, which requires employers to compensate employees for losses incurred in direct consequence of their duties.
In 2012, another Swift driver, James Rudsell, filed a class-action complaint alleging violation of labor laws.
Burnell and Rudsell reached a settlement with Swift in May 2019. Swift was to pay $7.2 million for the class claims, $2.4 million for attorney’s fees and $500,000 for the PAGA claim.
Two other Swift drivers who also had litigation against Swift for labor violation claims, Lawrence Peck and Sadashiv Mares, objected to the settlement.
The district court rejected their objections, and approved the settlement agreement in January, 2020.
Peck and Mares both appealed against their objection’s dismissal.
Erroneous standard
Mares argued the district court approved the settlement agreement with too low of a standard of fairness.
The district court found that the settlement was fair and reasonable, and the product of a non-collusive, arms-length negotiation, but did so before a class was certified.
The 2019 Ninth Circuit decision in Roes 1-2 v. SFBSC Mgmt. decided that approval of a settlement agreement before a class has been certified requires a higher standard of fairness and a more probing inquiry than if the class had already been certified.
The Ninth Circuit agreed, and vacated the settlement.
Lack of standing
Peck argued the class representatives lacked standing to settle the PAGA claim because they failed to exhaust administrative procedures before bringing the lawsuit.
The appellate court directed the appellants to use a new standard decided by their May, 2021, decision in Magadia v. Wal-Mart Associates.
The court concluded a plaintiff did not have standing to bring a meal-break claim under PAGA because he did not suffer an injury himself.
The court ruled that PAGA cases are not necessarily qui tam cases, which allow plaintiffs to sue on behalf of the government even if they have not personally been injured by unlawful conduct.
The court ruled Peck had no right to appeal the PAGA settlement because he was not a party to the PAGA action, even though he would receive financial benefit if the case was settled in the workers’ favor.
Parties
Louis Benowitz of Louis Max Benowitz Law Offices in Beverly Hills, and Marcus Bradley of Westlake Village’s Bradley/Grombacher LLP represented Burnell.
Ellen Bronchetti and Ronald Holland of San Francisco’s McDermott Will and Emery LLP, John Ellis and Robert Mussig Jr. of San Francisco’s Sheppard Mullin Richter and Hampton, Hilary Habib and Corinne Hays of Los Angeles’ Sheppard Mullin Richter and Hampton LLP represented Swift.
James Cahill of Pasadena represented Peck.
Donald Clapp of Oakland’s Aiman-Smith and Marcy represented Mares.
Central District of California Judge Virginia Phillips oversaw the case.
Ninth Circuit Judge Milan Smith Jr. wrote the opinion, which Ninth Circuit Judge Sandra Segal Ikuta, and United States District Judge John Steele, on designation, joined.
Case number 5:10-cv-00809
Appellate number 20-55119
Read the ruling here.
